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    Copyright: The following text is for personal information only. Any professional use or publication in written or electronic form is subject to an agreement with AIM, 17 rue Rebeval, F-75019 Paris, France

    SAT, 14 FEB 1998 22:20:28 GMT

    NO MORE SECRECY IN BANKS FOR MILLIONAIRES

    AIM Sofia, 4 February, 1998

    Bankers say that every bank relies on three main principles one of which - banking secrecy had to be interrupted in Bulgaria because of bad debtors or "credit millionaires" as this class of the nouveau riches are better known, who have appeared nobody knows how after the fall of the communist regime in November 1989. After opening of bank archives it became clear who and in what way drained billions of levs from the banking system.

    It was expected that the draft law submitted by the first mayor of Sofia - non-communist, nowadays a deputy from the list of the Union for National Salvation, Aleksandar Karakachanov, would give the answer why a series of Bulgarian banks have gone to ruin in the past two years. It was a very painful moment for the economy, because savings of a few hundred thousand citizens were destroyed due to systematic uncontrolled emptying of the vaults. Due to that, confidence in the banking system has declined for a long time to come, which could in a sense be compared with the panic aroused by tumbling down of financial pyramids.

    Karakachanov's law referred to all the enterprises and persons who demanded a credit of more than 5,000 German marks but failed to pay it back. After a serious work of the Bulgarian National Bank (BNB) a list of 3,882 credit beneficiaries was revealed, whose unreturned credits exceeded the sum of 2,746 billion levs (2.746 billion German marks). Majority of observers are resolute that in fact, the list of unsettled credits is a specific history of robbing Bulgaria. Karakachanov's law, however, does not make a distinction between "credit millionaires" and an enterprise which was granted a credit in order to develop certain business, but went bankrupt. The most striking cases of debtors of billions of levs outlined the scheme of uncontrolled outflow of money belonging to the banks. It is easy to recognize credit millionaires. They are people who appeared with piles of money at the very dawn of democracy. They were not stingy to pay for their public appearances and as a rule liked to demonstrate their great financial capabilities - either by luxurious cars and the way of living, or by sponsoring football teams or some other social activity. As concerning their economic activities, often they were connected with some unprofitable projects, and often it was established after their bankruptcy that it had not even existed. There are a lot of such examples on Karakachanov's list, but it turned out that they were not the greatest evil.

    The most dangerous for the economic environment of Bulgaria globally are credit millionaires who have banks of their own. Their appearance is made possible due to uncontrolled issuing of licences for foundation of banks by the BNB. At a certain moment, it seemed as if each wealthy Bulgarian could establish a bank, and the lack of supervision of their operation became evident only after the first banks faced bankruptcy. Nowadays, it became clear how much the owners of savings accounts had to pay for financial experiments of former "bankers". Most typical is the example of AGROBUSINESSBANK from Plovdiv, the first which went bankrupt and was bought by the BNB for the symbolic price of 1 lev. Enterprises linked to the former owners - Hrist Aleksandrov and Hrist Danev (one former waiter and the other a barman) lost the total of 54.617 billion levs (54 million German marks). Known as "Plovdiv brokers" in their most prosperous years, the businessmen threw piles of money into projects of dubious prifitability - media, agricultural production, support of a football club. Lack of control by the BNB led to bankruptcy of the AGROBUSINESSBANK primarily due to bad credits granted to enterprises of the "brokers".

    In a similar way, a number of Bulgarians undeservedly became known as big businessmen only thanks to credits granted to their banks - Evan Evlogijev (International Bank for Investments and Development), Ivo Georgijev (Elitbank), Valentin Mollov (former Mollov Bank), Ivan Kitov (Businessbank), Atanas Tilev (Bank of Agricultural Credits). They were all owners and managers of the already disappeared category of financial intitutions. Only the circle around Evlogijev owes 30 million US dollars to the International Bank of Investments and Development which is approximately equal to the amount of one tranche of the IMF. As concerning the credits granted by Elitbank, 79 per cent of them were issued to six beneficiaries. Three of them are connected with the owners of the bank.

    The second category of large debtors are banks - credit millionaires. After a systematic loss of money, one by one banks were left with their vaults empty. In order to guarantee stability of the system, the BNB continued to finance those who were in a difficult situation - by issuing money and increasing inflation. That is how the First Private Bank received from the BNB 91 billion levs (91 million German marks), Agrobusinessbank 50 billion, etc. In majority of cases, the situation in banks did not improve, but inevitably brought about a loss of money until the day when the BNB closed its vaults, and angry citizens queued in front of various banks.

    Nevertheless, the greatest credit millionaire was not the owner of a bank, but the company which was considered to be the most powerful in Bulgaria - Multigroup. Enterprises of this group were granted credits amounting to 91.185 billion levs (91.185 million German marks). Credits were granted mostly by the state Balkanbank which also ended up bankrupt. The second on this list is the company Euroenergy which a little over a year ago bought the ruined oil refinery Plama in Peven. With the debt of Plama, Euroenergy owes to banks the total of 204 billion levs (204 million marks).

    The refinery itself was often pointed out as a typical example of state illiquidity. For a long time, the bankers granted credits to Plama for various reasons. On the one hand, not a single government dared make bankruptcy of the largest enterprise Pleven public, because of the possibility of a strike. On the other hand, bankers granted credits without any control hoping that the state would guarantee that they will be returned. Plama is still working, and the owner of Euroenergy is resisting attacks of banks-creditors and discontented workers on strike.

    On the top of the list of credit millionaires are known names from the recent history of Bulgarian market economy - owners of the company of mobile phones MOBITEL and Standart newspaper Krasimir Stojcev, deputy and owner of the private tv stations called 7 Days Georgi Agafonov and others. When we add names of Hrist Aleksandrov, Hrist Danov, Ilija Pavlov (owner of Multigrup), it is clear that they form a big part of the famous G-13 - the first attempt of a merger of Bulgarian "big" business. Nowadays, a few years after dissolution of G-13, it is becoming clear that majority of these people have created the image of wealth and millionaires only thanks to bank credits and at the expense of ordinary people and their savings accounts.

    AIM Sofija

    GEORGI FILIPOV